2025 (7) TMI 1950 - AT - Income Tax

TDS u/s194Q on gross goods purchases for commission agent, despite booking only commission income; full credit allowed

TDS credit was denied on the ground that Form 26AS reflected TDS deducted under s. 194Q on the gross value of goods, whereas the assessee, a commission ... Denial of TDS credit - TDS credit was denied by CPC on the ground of mismatching in turnover in the books vis-à-vis amount as reflected in Form 26AS - purchaser deducted TDS u/s 194Q on gross value of goods which was reflected in Form 26AS whereas the assessee recorded only commission income in its books of accounts - as submitted buyer should have deducted TDS u/s 194J and not u/s 194Q. HELD THAT:- The provisions of Sec. 194Q do not determine the taxability of income in the hands of the recipient assessee. These provisions merely put on obligation on payer to deduct TDS on high value purchases. The said provisions target buyers with a specific turnover threshold, requiring them to withhold a portion of their payments as TDS as purpose of the provisions is to improve the process of tax collection and ensure clear financial transactions. The specified buyers having turnover of more than Rs. 10 Crores are required to deduct TDS while making purchases of more than Rs. 50 Lacs from a single buyer. However, the gross turnover may not constitute real income of the assessee. The assessee, in the present case, act as a commission agent and sells agricultural produce on behalf of the farmers. The purchasers have deducted TDS while making purchases from the assessee. The assessee, as per statutory mandate, has offered commission income on these transactions. No case has been set up by CIT(A) that the assessee has concealed the gross sales/turnover or the same do not form part of assessee’s books of accounts. Assessee has reimbursed the sale proceeds to the farmers and earned commission out of the same. The Rule 37BA would have no applicability at all since it is not the case that the income arising out of these transactions would be offered to tax in multiple years. There is no dispute that these transactions form part of assessee’s books for this year. The TDS has been deducted qua the assessee and the same has duly been reflected in Form 26AS. In the absence of any allegation that any of the transactions as reflected in Form 26AS do not form part of assessee’s books for this year, full TDS credit could not be denied to the assessee. AO is accordingly directed to allow full TDS credit to the assessee after due verification of Form 26AS. Assessee appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, on the facts found, the assessee was entitled to full credit of TDS appearing in Form 26AS even though the assessee offered only commission income (and not the gross value of goods sold) in its return for the relevant year. (ii) Whether restriction of TDS credit by applying Rule 37BA/'Rule 37B' was legally sustainable where there was no finding that the corresponding receipts/income were assessable in different years or that the related transactions were not recorded in the assessee's books for the year. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i) & (ii) (grouped): Entitlement to full TDS credit reflected in Form 26AS despite commission-agent accounting Legal framework (as discussed by the Court): The Court considered that Section 194Q merely creates an obligation on specified buyers to deduct TDS on high-value purchases and does not, by itself, determine the taxability or 'real income' in the recipient's hands. The Court also examined the applicability of Rule 37BA in the context of the denial/restriction of TDS credit. Interpretation and reasoning: The Court found that the assessee acted as a commission agent for sale of agricultural produce on behalf of farmers and, as per normal accounting practice for such an arrangement, recorded only commission as income because the assessee was not the owner of the goods. Consequently, gross sale proceeds routed through the assessee would not necessarily correspond to the assessee's own 'real income.' The Court emphasized that deduction of TDS under Section 194Q by purchasers does not convert the gross turnover into taxable income of the assessee. The Court held that denial of full TDS credit was unjustified because: (a) TDS had been deducted in the assessee's name and was reflected in Form 26AS; (b) there was no case set up that the assessee concealed gross sales/turnover or that the transactions reflected in Form 26AS did not form part of the assessee's books for the year; and (c) Rule 37BA had no application since it was not a situation where income from the transactions was to be offered across multiple years, and there was no dispute that the transactions were accounted for in the relevant year. Conclusions: The Court conclusively held that, in the absence of any allegation or finding that Form 26AS transactions were not recorded in the assessee's books for the year or were taxable in multiple years, full TDS credit could not be denied. The assessing authority was directed to allow full TDS credit as available in Form 26AS.